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Wachovia Corp./Wells Fargo paid $160 million to settle a federal investigation into laundering of illegal drug profits through Mexican exchange houses. Read more:
(How to) Money Laundering
Money laundering is a series of financial transactions that are intended to transform ill-gotten gains into legitimate money or other assets.
It may seem suspicious if you start depositing large sums of cash directly into a bank or other financial institution. The money’s owner needs to create financial records showing where the money came from, this is done by simply running it through a number of legitimate businesses before depositing it, hence the term “money laundering.” Because the act is specifically used to hide illegally obtained money, it too is unlawful.
Over $300 billion is laundered each year in the United States alone. According to a 2009 study published by the United States Sentencing Commission, more than 81,000 people are convicted of money laundering on some level each year in the United States.
The Bank Secrecy Act of 1970 requires financial institutions to report deposits over $10,000 in a single day. To circumvent this, launderers funnel cash through a legitimate high-cash business, such as a check cashing service, bar, nightclub, or convenience store.
Businesses able to claim all of these proceeds as legitimate income include those that provide services rather than goods, such as strip clubs, car washes, parking buildings or lots, and other businesses with low variable costs.
Anti-money laundering software, detects large increases in account balances or large withdrawals, and which filters data and classifies it according to levels of suspicion. Software is also used to detect transactions with banking institutions in blacklisted or hostile countries.
Bulk cash smuggling involves literally smuggling cash into another country for deposit into offshore banks or other type of financial institutions that honor client secrecy.
Structuring or “smurfing,” is a method in which cash is broken down into smaller amount, which are then used to purchase money orders or other instruments to avoid detection or suspicion.
Trade-based laundering is similar to embezzlement in that invoices are altered to show a higher or lower amount in order to disguise the movement of money.
Real estate laundering occurs when someone purchases real estate with money obtained illegally, then sells the property. This makes it seem as if the profits are legitimate.
Shell companies and trusts are used to disguise the true owner or agent of a large amount of money.
Anti-Money Laundering Laws
Under the guidelines set forth by anti-money laundering, or “AML” financial institutions are required to verify large sums of money passing through the institution, and they are required to report suspicious transactions.
It is estimated that money laundering is so prominent globally, that it is impossible for the Financial Action Task Force to produce estimates or figures as to its scope.
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